Chip Suppliers Stand To Benefit From Better-Than-Expected Galaxy S7 Sales

| About: Samsung Electronics (SSNLF)

Summary

Multiple reports indicate Samsung's Galaxy S7 and S7 Edge are seeing stronger-than-expected initial sales.

The reports follow solid reviews for the devices.

Broadcom, Qualcomm, and other known S7 chip suppliers stand to gain.

Samsung's (OTC:SSNLF) Galaxy S7 and S7 Edge, which launched to relatively low expectations after Samsung (OTC:SSNLF) (OTC:SSNNF) ceded smartphone share once more in 2015, appear to be off to a good start. The Korea Times reports pre-orders for the high-end smartphones topped expectations in Europe, China, and India, and that Samsung indicated European pre-orders are up 250% relative to the S6s.

Meanwhile, the Korea Economic Daily reports (citing "sources close to the company") Samsung will post a Q1 op. profit of more than KRW6T ($5.2B), above prior estimates of KRW5T-5.5T. It adds more than 10M S7 and S7 Edge units are estimated to have been shipped during their first 20 days of availability; the S6 took 25 days to reach that level.

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Samsung still has its hands full battling Apple (NASDAQ:AAPL) and a slew of Chinese Android OEMs whose low-end and mid-range offerings are steadily getting better. But it does look like the company did enough right with the S7/S7 Edge to halt its skid for the time being. Reviews have generally been strong, with reviewers praising the phones' OLED displays and glass/metal builds (much in common with the S6), and often declaring the 12MP camera going into the devices - it features large 1.44 micron pixels, a fast f/1.7 aperture, and rapid autofocus - among the best available on a smartphone. Samsung has also received praise for the S7's Always On Display feature, and for including a microSD slot and waterproofing (found on the S5, but not the S6).

S7 chip suppliers are due to benefit better-than-expected S7 sales. Broadcom (NASDAQ:AVGO) is near the top of the list: Teardowns from iFixit and Chipworks uncovered a Broadcom multi-mode power amplifier module (via Avago), and a Murata Wi-Fi module (believed to contain a Broadcom combo chip).

Qualcomm (NASDAQ:QCOM), which saw its Snapdragon 820 processor designed into some S7 units after having the Snapdragon 810 shut out of the S6, is another beneficiary. Chipworks' teardown of an S7 Edge powered by the 820 found seven other Qualcomm chips: Two power management ICs, two transceivers, a digital tuner, an audio codec, and an envelope tracking IC.

Also faring well in Chipworks' teardown:

  • Qorvo (NASDAQ:QRVO), which supplied two RF modules and a power amplifier duplexer.

  • Knowles (NYSE:KN), which supplied two microphones.

  • Maxim (NASDAQ:MXIM), which supplied two power management ICs, an audio amplifier, and a time-of-flight sensor.

  • IDT (NASDAQ:IDTI), which supplied a wireless charging IC.

  • STMicroelectronics (NYSE:STM), which supplied a gyroscope.

  • NXP (NASDAQ:NXPI), which supplied an NFC controller IC. Samsung opted for its own NFC controller in many S6 units.

Samsung, of course, isn't the only game in town for the aforementioned companies - several of them are also iPhone suppliers, and most have healthy exposure to Chinese OEMs. But this week's S7 reports still act as a jolt of good news for a group of companies that could use some: Many of them issued light calendar Q1 guidance due to softer-than-expected iPhone sales.

The S7's performance, together with the launch of the 4" iPhone SE at a lower-than-expected $399 base price, should provide a boost for Apple/Samsung chip suppliers ahead of this fall's expected iPhone 7 launches.

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